At the beginning of Year 2, the Redd Company had the following balances in its accounts.

Cash	$17,300
Inventory	7,500
Land	2,700
Common stock	16,000
Retained earnings	11,500

During Year 2, the company experienced the following events:

1. Purchased inventory that cost $11,900 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $870 were paid in cash.
2. Returned $800 of the inventory it had purchased because the inventory was damaged in transit. The seller agreed to pay the return freight cost.
3. Paid the amount due on its account payable to Ross Company within the cash discount period.
4. Sold inventory that had cost $8,000 for $16,000 on account, under terms 2/10, n/45.
5. Received merchandise returned from a customer. The merchandise originally cost $1,550 and was sold to the customer for $2,800 cash. The customer was paid $2,800 cash for the returned merchandise.
6. Delivered goods FOB destination in Event 4. Freight costs of $760 were paid in cash.
7. Collected the amount due on the account receivable within the discount period.
8. Sold the land for $4,900.
9. Recognized accrued interest income of $600.
10. Took a physical count indicating that $7,200 of inventory was on hand at the end of the accounting period. Hint:Determine the current balance in the inventory account before calculating the amount of the inventory write down.

Required:

1. Identify each of these events as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also explain how each event would affect the financial statements by placing a + for increase, for decrease, and +/ for increase and decrease under each of the components in the following statements model. Assume that the perpetual inventory method is used. When an event has more than one part, use letters to distinguish the effects of each part. The first event is recorded as an example.
2. Record the events in general journal format. Assume that the perpetual inventory method and gross method is used.
3. Post the beginning balances and the events to the T-accounts. Note that these ledger accounts will also be used when posting the closing entry that is created in Part e.
4. Prepare a multistep income statement, a statement of changes in stockholders equity, a balance sheet, and a statement of cash flows for Year 2.
5. Use a single general journal entry to close all revenue, gain, and expense accounts to the retained earnings account. Post the journal entry to the ledger accounts and prepare a post-closing trial balance.

Identify each of these events as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). A affect the financial statements by placing a+ for increase, - for decrease, and +/ for increase and decrease under following statements model. Assume that the perpetual inventory method is used. When an event has more than one effects of each part. The first event is recorded as an example. (In the Statement of Cash Flows column, use the initi activity, IA for investing activity, and FA for financing activity.) Record the entry for inventory purchased on account from Ross company under terms 1/10,n/30. B Record the entry for freight cost paid in cash. C Record the entry for return of inventory that was damaged in transit. D Record entry for discount on inventory purchased. E Record the entry for cash paid for accounts payable. F Record entry for sale of inventory on account. G Record entry for cost of goods sold. H Record entry for return of merchandise sold. I Record entry for cost of goods sold return. J Record cash paid for freight charges for delivered goods. K Record entry for discount on inventory sold. L Record the entry for collection of amount due on the account receivable within the discount period. M Record the entry for the sale of land. N Record entry to recognized accrued interest income. O Record entry for inventory loss. Journal entry worksheet Record the entry for inventory purchased on account from Ross company under terms 1/10,n/30. Note: Enter debits before credits. Accounts Receivable \begin{tabular}{|l|l|l|l|} \hline \multicolumn{2}{|c|}{ Accounts Receivable } \\ \hline Beg. Bal. & & & \\ \hline & & & \\ \hline & & & \\ \hline End. Bal. & & & \\ \hline & & & \\ \hline \end{tabular} Common Stock Beg. Bal. End. Bal. Transportation-out Beg. Bal. End. Bal. \begin{tabular}{|l|l|l|} \hline & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline \end{tabular} Gain on Sale of Land Beg. Bal. End. Bal. \begin{tabular}{|l|l|l|l|} \hline \multicolumn{3}{|c|}{ Inventory } \\ \hline Beg. Bal. & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline End. Bal. & & & \\ \hline & & & \\ \hline \end{tabular} Interest Receivable Beg. Bal. End. Bal. Accounts Payable Beg. Bal. End. Bal. Retained Earnings \begin{tabular}{|l|l|l|l|} \hline Beg. Bal. & & & \\ \hline & & & \\ \hline & & & \\ \hline End. Bal. & & & \\ \hline & & & \\ \hline \multicolumn{2}{|c|}{ Cost of Goods Sold } \\ \hline Beg. Bal. & & & \\ \hline & & & \\ \hline & & & \\ \hline End. Bal. & & & \\ \hline & & & \\ \hline \end{tabular} Interest Revenue \begin{tabular}{|l|l|l|} \hline & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline \end{tabular} Req B Req D1 > Prepare a multistep income stateme \begin{tabular}{|l|l|l|} \hline \multicolumn{1}{|c|}{ REDD COMPANY } & \multicolumn{1}{c|}{ Balance Sheet } & \\ \hline \multicolumn{1}{|c|}{ As of December 31, Year 2 } & \\ \hline Assets & & \\ \hline & & \\ \hline & & \\ \hline Total assets & & $ \\ \hline Liabilities & & \\ \hline Stockholders' Equity & & \\ \hline & & \\ \hline Total stockholders' equity & & \\ \hline Total liabilities and stockholders' equity & & \\ \hline \end{tabular} Journal entry worksheet Record entry to close all revenue, gain, and expense accounts to the retained earnings account. Note: Enter debits before credits